Municipals held steady Monday while Treasuries weakened and equities rose as investors refocused on the effectiveness of vaccines against COVID-19.
Yields on top-quality munis were unchanged on the AAA scale with Treasury bond yields rising as much as four basis points.
Successes in finding effective vaccines against the coronavirus pushed investors into a risk-on mode as they took a fresh look at stocks. Some buyers also expect a federal stimulus bill will be passed before yearend.
“Munis, still marching to their own drumbeat, remain steady with very little activity to suggest otherwise,” said Peter Franks, Refinitiv MMD senior market analyst. “Muni Monday on a Thanksgiving holiday week will make it challenging for those who track trade data. There is very little activity ... and given the holiday week if you blink you might miss it.”
In the news, Regeneron received FDA Emergency Use Authorization for its vaccine, AstraZeneca said a trial of its vaccine drug was about 70% effective and Merck announced it will buy OncoImmune, which is testing a drug that cuts the risk of death in patients hospitalized with the coronavirus.
“We believe that medium-term positives will outweigh short-term worries, allowing markets to move higher,” said Mark Haefele, chief investment officer at UBS Global Wealth Management. “For the greatest upside potential, however, we recommend investors diversify into the next leg of the recovery, increasing exposure to select cyclical sectors that have lagged so far during 2020.”
Primary market
Volume for the holiday-shortened trading week is estimated at $1.27 billion, with a calendar composed of $1.04 billion of negotiated deals and $233 million of competitive sales. There are only two negotiated deals slated that are over $100 million.
“This week's new issue calendar is nearly a trickle with just $755 million in tax-exempts and $512 million in taxables are on the slate, well below last week's nearly $11 billion combined total,” Franks said.
On Tuesday, JPMorgan Securities is expected to price the New York Transportation Development Corp.’s (Baa1/NR/BBB/NR) $340.045 million of special facility revenue refunding bonds for the Terminal 4 John F. Kennedy International Airport Terminal Project. The deal consists of $293.46 million of Series 2020A tax-exempts subject to the alternative minimum tax and $46.585 million of Series 2020B taxables.
Also on Tuesday, Citigroup is expected to price the Denton Independent School District, Texas’ (NR/AAA/AAA/NR) $266.693 million of Series 2020A taxable refunding bonds. The deal is backed by the Permanent School Fund guarantee program.
There are no competitive sales slated for the week that are over $50 million.
Secondary market
Some notable trades Monday:
Massachusetts 5s of 7/01/2025 [57582RTG1] traded in a block of over 5 million at 121.557 at a yield of 0.280% and a block of over 5 million at 121.608 at a yield of 0.270%. Massachusetts 5s of 10/01/2025 [57582RNL6] traded in a block of 1 million at 122.725 at a yield of 0.284%. Massachusetts 5s of 11/01/2045 [57582RK39] traded in a block of 1.5 million at 131.904 at a yield of 1.520%. Massachusetts 5s of 11/01/2050 [57582RK47] traded in a block of 1 million at 131.212 at a yield of 1.584%.
DASNY 5s of 3/15/2021 [64990EX69] traded in a block of 1.8 million at 101.488 at a yield of 0.170%. NYS UDC 5s of 3/15/2023 [650035E20] traded in a block of 1 million at 110.836 at a yield of 0.287%. NYS EFC 5s of 6/15/2022 [64986AY39] traded in a block of 1 million at 107.474 at a yield of 0.194%.
Last week, the largest use of proceeds in the muni sector was industrial development followed by education and utilities, according to IHS Markit.
High-grade municipals were steady across the curve on Monday, according to final readings on Refinitiv MMD’s AAA benchmark scale. Short yields were flat at 0.14% in 2021 and 0.15% in 2022. The yield on the 10-year muni was steady at 0.73% while the yield on the 30-year was flat at 1.42%. The 10-year muni-to-Treasury ratio was calculated at 85.2% while the 30-year muni-to-Treasury ratio stood at 90.9%, according to MMD.
The ICE AAA municipal yield curve showed short maturities unchanged at 0.14% in 2021 and 0.15% in 2022. The 10-year maturity was steady at 0.72% and the 30-year yield was flat at 1.43%. The 10-year muni-to-Treasury ratio was calculated at 86% while the 30-year muni-to-Treasury ratio stood at 91%, according to ICE.
The IHS Markit municipal analytics AAA curve showed short yields at 0.13% and 0.12% in 2021 and 2022, respectively, and the 10-year steady at 0.70% as the 30-year yield remained unchanged at 1.44%.
Treasuries were weaker as stock prices traded up. The three-month Treasury note was yielding 0.07%, the 10-year Treasury was yielding 0.85% and the 30-year Treasury was yielding 1.56%. The Dow rose 0.90%, the S&P 500 increased 0.35% and the Nasdaq gained 0.15%.
